When looking at the capital gains tax (CGT) position following a disposal of an asset, it is important to understand that CGT follows the beneficial interest in the property (as opposed to the legal title). Establishing the owner(s) of the beneficial interest should be considered on a case-by-case basis. The case of Asif Bhikhi v HMRC (2020) demonstrates the importance of properly documenting transfers of property which can often be overlooked in transactions between family members. In this case, the First-Tier Tribunal (FTT) held that there was insufficient evidence to demonstrate that the appellant retained their beneficial ownership of a property on a transfer. In any case, even if there had been an implied trust in place, the transfe...

HMRC has confirmed that the concession for trusts in receipt of small amounts of interest income has been extended until at least 5 April 2021. Under the arrangement, trustees and personal representatives ("PRs") are not required to submit tax returns or make payments under informal arrangements where the only source of income is savings interest and the tax liability is less than £100. Why was the concession introduced? From 6 April 2016, banks and building societies stopped withholding income tax on interest paid to individuals and trusts. Whilst individuals were awarded with a  “Personal Savings Allowance” enabling them to earn up to £1,000 interest tax free, this allowance was not extended to trusts. Therefore, trusts...

Follower and accelerated payment notices were introduced in Finance Act 2014 with a view to addressing taxpayers and promoters involved in tax avoidance schemes. The objective of these rules was to improve efficiency with dealing with tax avoidance schemes and to ensure that tax in dispute in relation to the use of an avoidance scheme is held by HMRC until it is resolved. However, these measures have been criticised as draconian by some of those affected, citing the lack of right of appeal and scepticism over whether they are sufficiently targeted as areas for concern. What is a Follower Notice? Where marketed tax avoidance schemes are entered into by a large number of taxpayers, it is more efficient for HMRC to investigate a re...

In its first report from November 2018, the Office of Tax Simplification (OTS) highlighted the significant difference the number of IHT forms submitted each year (275,000), and the number that resulted in inheritance tax (IHT) being due (24,500), highlighting the administrative burden of the current system. In its second report, the OTS provides suggestions of how the system could be made easier to understand, more intuitive, and simpler to operate. Recommendations Lifetime Gifts A number of IHT reliefs/exemptions apply on gifts made during a person’s life. The OTS note that these can be confusing and difficult to apply, and have therefore made the following recommendations: 1 - Replacement of several monetary gift exemptio...

HMRC has changed the registration deadline on its disguised remuneration (DR) settlement opportunity. Those looking to take advantage of this opportunity should register their interest as soon as possible. Background As reported in our previous blog, HMRC is currently running a settlement opportunity for users of DR schemes to settle their tax affairs before a new loan charge comes into effect in April 2019. HMRC had stated that users must register their interest by 31 May 2018 and submit all the required information by 30 September 2018. These dates were designed to give HMRC enough time to process cases before the April 2019 loan charge comes into effect. New Deadline Despite the 31 May deadline for registrations havi...

As covered in our previous blog, the introduction of the new online Trust Registration Service (TRS) has been repeatedly delayed as a result of problems with the introduction of the new system. On 5 March 2018, HMRC contacted the professional bodies outlining its policy for charging administrative penalties for the late registration of trusts and estates. HMRC previously confirmed that while the normal deadline of the 31 January for existing trusts and estates would remain in place, it would not charge penalties where registration took place by 5 March 2018. Penalties HMRC can impose the following penalties for late registration: Up to three months late - £100 penalty Three to six months late - £200 penalty More tha...

HMRC have announced a new settlement opportunity for users of disguised remuneration (DR) schemes. Those wishing to take part in this opportunity must register their interest by 31 May 2018 and make a full disclosure by 30 September 2018. Background HMRC previously ran a similar settlement opportunity for users of employee benefit trusts (EBTs) which closed on 31 July 2015.  A number of DR cases were before the courts around this time including the ‘Big Tax case’ of Rangers v HMRC which was before the Scottish Court of Session. Since then the Court of Session and the Supreme Court have ruled in favour of HMRC, dismissing the effectiveness of EBTs and loans as tax avoidance mechanisms.  HMRC has stated that it intends use t...

Trusts and complex estates with tax liabilities or reportable events in 2016/17 are normally required to notify HMRC of this by 5 October 2017. HMRC have now announced that as part of the introduction of the new online Trusts and Estates Register, this deadline has been extended to before 5 December 2017. Trusts and Estates Register The new online register for trusts and complex estates is being introduced as part of the EU’s Fourth Anti-Money Laundering Directive. The new register is designed to streamline the process by which trustees and personal representatives notify HMRC about their trust/estate.  Previously this process was done by paper.  The new service is also aimed at making it easier for details to be updated re...

The Supreme Court has upheld the decision of the Scottish Court of Session in what has become known as the ‘Big Tax Case’.  The Court found that an employee benefit trust (“EBT”) scheme which redirected employees’ earnings by way of loans from a series of trusts was ineffective for avoiding income tax and NICs. Background The appeal was brought by the liquidators for RFC 2012 Plc (“RFC”), the former corporate owners of the Rangers FC.  RFC itself went into administration in 2012 with and the club itself is already under new ownership. RFC was involved in a tax avoidance scheme designed to remunerate employees of the club. As part of this scheme, RFC would pay a lump sum to a principal trust and would recomm...

Click here to download Issue 3, 2017 of the Personal Tax Newsletter. This issue contains details of the Summer Finance Bill 2017,  provides some insightful statistics on Income Tax, and reviews a recent case concerning maintenance payments from a Will.